How does a high LTV enable a $700M DTC exit?

How did you secure Forever 21 investment? >> In the first time, they actually said no, they didn't want to invest. I don't know how to sell women's clothing, but I can see all this data coming in and data we trust. >> Why was it better to sell for the cash versus doing an IPO? >> I think there were two factors. One, >> what's your advice to founders that might be brand building, direct to consumer space right now? >> It's not for the faint of heart. A bunch of folks are like, "Wait a minute, you're still in business. Like, how are you guys still alive? Hey everyone, welcome back to $100 million exits. Today we have Brian Reed. Brian, you and I were playing paddle uh not too long ago at the postexited conference in Miami. I heard your story and I was like, you got to come on the podcast. For those that don't know Brian, uh he built a company called Daily Look, merged it to Adore Me right before Adore Me sold to Victoria Secret for a $700 million transaction, $400 million cash, $300 million in additional consideration after the exit. Brian, you are a fashion, apparel, and direct to consumer, you know, hero. You know, having that type of exit. Welcome to the show. >> Hey Jason, thanks for having me. Hopefully we can play Pedal soon again. Had a lot of fun that day. >> Should have won. Should have won. Um, yeah, really excited to have you on the show for obvious reasons. You know, you this is a massive exit. Obviously, it was peak market when all these types of deals were, you know, more likely to happen. Obviously, the market shifted. We'll talk more about that later, but I want to kind of get into the the details uh of Daily Look. If you can kind of just give everyone a quick um idea of what Daily Look, and you ultimately grew this to about 30 million and then after acquisition grew to 140 million in revenue, you walk us through a little bit about what Daily Look was and kind of how you hypers scale that revenue engine. Yeah. So, uh, Daily Look is a a woman's premium personal styling service, uh, where we, uh, use human stylist plus AI to curate a box of 10 items and you get sent a box of items to your home, styled and curated, and you try it all on, and you keep what you love, and you return the rest. And so our business model really relied on the fact of whether we could accurately style you send products that you're really likely to keep. And if you kept three to four items per box, which was around $300 of purchase value, it was a great business. And if we're unable to do that, uh it was it was not a great outcome. But we over time we were really able to invest in our algorithms. We had our own deep learning neural net that powered uh sort of the expected value of every single item in our skew universe. So we actually knew with a high degree of certainty where we're going to send you products how likely you were to keep it. And then the stylist there I I like to consider them sort of more like last mile stylist where they were responsible in putting together the sort of the whole headto toe ensemble or look and and build like a a nice story around it. I would say mission accomplished on the core uh business concept. Obviously, there's been other players in the space that have, you know, done something in a capacity, but I would say from an exit capacity, you guys did pretty well. What was it like kind of driving that revenue to to that level? Like what were the levers that you guys you push? And this is also you grew substantially after the whole pixel gate, you know, issue on Facebook and Google. Um, so you still managed to overcome that. >> Yeah. So back in like 200 2017, uh, I made it a strategic priority where the only thing we cared about in our northstar was to both maximize customer LTV and actually have the highest e-commerce LTV uh, amongst any kind of apparel brands. And so uh my thought process then was uh in order to grow customer base you had to pay the Google tax or the meta tax. And um you know customer acquisition costs fluctuate. There's a high degree of variability. They change their algorithm and your tech can increase by 50% overnight. So I'm like, well, if we're going to be able to weather those storms and be able to grow in any environment, then we need to have the highest customer LTV. And if we are able to achieve that, then, you know, we'll be able to control our own destiny. Now, in our business and and most consumer businesses, it's not that easy to drive customer LTV, but for us being a subscription, it was really about two things. one is uh maximizing the unit economics or gross profit per box every time you send that box. And then the really the second big big lever to focus on was retention, right? Like how many boxes are you going to receive over your lifetime before you cancel or opt out? And so I would say for first couple of years we really focused on optimizing and maximizing uh our our unit economics which once again meant investing heavily in the styling accuracy increasing the uh the product quality, the price point. Uh half of our product in our box was curated with in-house uh our own branded products. So we had five brands in house which are all private label. They are moderately price point but with very strong margins because we control the whole supply chain. So that drove a lot of uh gross profit in the box. And then toward the later years, we really focused on retention and particularly month 12 retention and understanding our cohort performance like how many% of percentage or what percentage of our customers that are active subscribers are going to stay and be an active subscriber a year later. And eventually those two those are two big areas that kind of roll up into LTV. RLTV ended up being close to $500, uh, which is substantially higher than all the competition. I can tell you based on some public numbers that we had two and a half times more 52- week spend than the average uh, Stitch Fix 52-E client. Uh, just to give you a degree of like, you know, how how well we performed. >> Substantial gap. >> Yeah. Substantial. And so uh it made a lot of sense to me why in the past 5 years we were able to grow even when uh online advertising on meta became more expensive and we were still highly profitable. Whereas if you looked at someone like StitchFix in that same period because they're a public company, uh they their business was contracting and they were losing quite a bit of money probably because they kept continued to spend a lot of money on online acquisition, but it was unprofitable spent, right? Because they don't have the LTB to support that CAC. And so I think that became a pretty sustainable mode for us and and pretty defensible because you can't manufacture LTV. you have to deliver a great customer experience and a great product and that's what we were able to do. >> And a common theme I'm hearing from you and kind of like the note for other founders that are in the kind of the direct to consumer brand building space is you had a relentless focus on LTV but you had the data like and it sound like you had a real data infrastructure for your organization probably at an early early stage of the company. How did you kind of set that up? Was it just who you are and how you programmed or do you hire some people that kind of made that possible? >> So data was one of our five core values and it was uh I still remember the little mantra. It was in data we trust. In data we trust. And um we had that throughout our DNA and culture. And I would say, so just to give some additional context, I don't come from fashion apparel. I've never been never had a career in retail other than having sold some, you know, stuff at a prior e-commerce company early on. Uh, and apparel is quite a complicated, challenging, you know, skew heavy business. Uh, and so the great thing about our business, I learned really early on, is that we send an item to you and you're making you're you're explicitly giving us a binary purchase decision, right? You're either returning it or keeping it. And so we're able to understand it's not even like intent. We don't have to like try to guess why you didn't buy it or why you clicked and did not purchase. you're a and and when you actually send the box back there's basically a mini survey. So you're saying I'm keeping keeping returning returning and really the gold is in the why people would pe there there's other like little questions that come up and you tell us why you're buying or keeping it the quality the price point the fit the color the style etc. And so from there, I'm like, "Okay, we have all this data. I'm not a merchant. Uh I don't know how to sell women's clothing, but I can see all this data coming in. And so we're just going to trust the data that the customers are explicitly telling us and build uh and we'll have a really large data set. And and we can use really data science or applied data science before deep learning to very quickly understand what products people are keeping and the why. And I think that was our competitive advantage. And so we just AB tested everything. AB tested or beyond, you know, what people typically test, which is our website. We could very quickly AB test styles and designs. And I very quickly understood like we need about 150 units sent to a a broad base of people telling us whether they're keeping or returning to know whether that product will be a hit or not, whether we should reinvest and scale up the units so that we don't have to take on any inventory risk. And the great thing about our business and why it was so profitable is because we had very little markdowns. We're a no discount business. We're super efficient with our inventory. And if it kind of relates to like if you read the case studies on the Harvard Business Review case studies on Zara, it's like, oh, they're really fast, but they also like are really fast about like being at the runways, getting inspired by styles, getting inspired or knockoff version, sending him into a handful of stores, and within like two days getting a read on whether those actual styles that they created are moving or not, right? And so in a in a sense they they were they were looking for signal but through an offline traditional distribution channel. But we can get much cleaner signal and we could do it much more quickly because we just sent out, you know, 200 boxes overnight with a new style and we'll know within five day, 4 days whether that style basically achieves the watermark needed to reinvest in that product at like a you know 10x bigger investment or if it's getting kept at 40%. then I don't have I would feel very comfortable scaling that buy from, you know, 200 units to 2,000 units and and be very comfortable that it's going to continue to sell. You know, it's a I one I appreciate the the methodical approach to to the style business because I I meet with so many DDC brands and they get so lost and it's our brand, you know, that's so focused on, you know, the the uniqueness about what they've done where it's you're kind of focused on just what are the customers actually doing and what that's amounting to and that's kind of how you maximize LTV. Um, what I want to kind of shift is like you to build that data infrastructure. A lot of consumer brands, you know, they kind of get started and they have, you know, spend the money on inventory and then they're kind of growing and especially these days it's a very different game and we'll talk about that later, but um you had to raise some money in the early days, but you you did it for what 14 years. You started like in 2011 or something like that. >> Yeah, I founded the company in late 2011. We sold the company in 2022 and I stayed on for another two years. Uh and then left basically January of 25. So >> yeah, >> pretty long. good good solid 14 year round >> and um you know you raised some money you had some investors join you on the journey but you didn't raise an astronomical amount it was relatively modest for the scale that you reached kind of walk us through the the fundraising journey that you had back in the early 2010s >> or mid >> 2010 so the first round was oddly enough the easiest to raise and back then when we started the business it was actually it was the same mission to make it really easy for someone to buy a whole look head to toe But we were actually a daily newsletter and that's where the name daily look came about. We were a daily outfit of the day newsletter and we the premise was we're going to put together this stylized look and we're going to sell it to you transactionally and make it really easy to buy the whole look with just one click. And that I think was a interesting or novel enough idea uh or way to buy make it easy to buy a whole look that it did get some initial traction. There are lots of folks that did uh sort of unboxing videos and outfitting videos on YouTube that uh started buying from us. And so that's kind of how we had our our first six months of traction and we raised uh you know modest seed round of I want to say something like 3 million uh $3 million but by that point we had already uh we had the traction of maybe $3 million of annual sales right within six months. So, we came out the gate um and we raised like a series A in two parts. I think one in 2014 and I think that was about $5 million and another $3 million or so in 2018. That was from Forever 21 and that was their first corporate investment. And after that we never raised. >> How did how did you secure Forever 21's investment? >> A lot of the vendors and manufacturers that we were working with were their suppliers. They basically owned the ecosystem or were the biggest check and buyers of merchandise in the uh the manufacturing like ecosystem in in Los Angeles. So the Los Angeles has a very big vibrant uh clothing manufacturing base. I would say you know hundreds of vendors. Some of them are are very big and they supply a lot of the big clothing uh retailers and do a lot of private labeling for folks including Forever 21. And at some point just through relationships I was able to meet the Forever 21 president and um took an interest in what we were doing and and and the first time they actually said no they didn't want to invest and then and I met with them in 2017 and then they kind of came around in 2018 and randomly pinged me and that's kind of how that investment came about later. uh and and their president Alex Oak ended up taking a board seat. >> That's pretty interesting. Kind of getting a strategic at that stage uh for this type of company. Um how did that work? Was that a good experience in the long run, bad experience? Did they influence anything or they just let you do your thing? >> No, they really let us do their thing. I think uh ultimately whenever you have someone on your board and that I think is super important that you have a certain level of professionalism and trust and rapport with that person like you wouldn't mind having a beer with them, spending some time with them. you have a great relationship because at the end of the day like your board is sort of one of the few people that can fire the CEO or founder but at the same time they have an incredible amount of experience and resources right he ran Forever 21 a multi-billion dollar business that grew and was a true sort of uh rags to rich's you know entrepreneurial story and and so he had a ton of resources and experience experience and wisdom. And I thought uh he had a great approach because he was really there to learn and he uh never really like like he didn't make assumptions that everything he knew about his business and Forever 21 applied directly to our business even though their business was so much bigger and they're essentially also in the apparel business. But I think it was there to learn uh what we were doing differently and I think in in the kind of business that we were in because we were innovating on sort of the distribution and business model side but at the end of the day the clothing the product that you're actually selling is the clothing and it's made and manufactured in the same way that their supply chains are. And so that actually I would say had almost 100% overlap. we weren't actually innovating in garment or pattern making or design and and that wasn't really the the the value prop. So I can get a lot of uh good advice and help from from him. >> No, that's good to hear. And yeah, there was a point in the business history where you know things got tight, things weren't super clear in terms of what to do next uh in terms of capital. um kind of what was that like when you know you had a really good run, it was going well and then things did weren't going as well. Like what did you kind of do? How did you handle it? And kind of give the the context to the to the listener. >> Yeah. So so there were two pivotal points where the company almost died. Uh, one was the first time was in 2014 when we made the big strategic pivot from being a outfit of the day newsletter selling transactionally to being a uh, personal styling subscription service via Box. And when we first made that pivot, we had so much demand. People love the idea of getting a curated box personally styled to them. And so we had a a weight list. Well, actually before the weight list, we had 10,000 people actually sign up saying they wanted a box before we turned it off and turned on the weight list. And then another 10,000 people on the wait list. So we were so excited by all this demand of people who had said, "Yes, I want a box." And when we had launched, there was no styling fee associated with receiving a box, which we have now. So styling fee is the the fee that you pay uh which will get credited toward any purchase made in the box, but it's like a a fee that you pay up front and it would cover the shipping both ways um and the stylist time. And so when we launched with no styling fee and had 10,000 people sign up, we were like, well, we we have to send at least 10,000 boxes out. And we did. So we did the best that we could but we had to scale it very quickly. We had the inventory. We didn't have the algorithms. We didn't have any deep learning neck or technology supporting that curation. And I wouldn't say it was disastrous. It was okay. Like let's say it people were keeping uh one and a half items or maybe 1.6 six items in that uh in that first batch run. But ultimately, we didn't have our a merge or price point and and that wasn't a high enough keep rate uh where let's say 40% of the people were also not buying anything and they were returning the whole box back. And so ultimately we had negative unit economics and and what that means is our our contribution margin or gross profit dollars were negative per box. And so scaling up the people, the resources, and then uh having essentially negative unit economics across 10,000 boxes over the next three months, we found ourselves burning several hundred,000 a month. And this was before we had raised an A- round. So we found ourselves um basically we were going to run out of cash in 3 months and so uh so we had to have a a pretty big uh downsizing of about 70% of the company at that time which is super painful. Um that we went from 100 to 30 people and that was rough. That was actually the worst experience that I've had as an entrepreneur. um very emotional and tough to see all these great people um that you have to let go because you're in a tight spot. uh and and ultimately uh I tried to raise a bridge round but at that time um you know a lot of folks basically wrote us off as having that we're going to be imminently bankrupt and and cease to exist and everyone was sort of dear in headlights saying we were just company of they called it walking dead and I I kind of heard this after the fact cuz investors that decline are are going to be much too polite to say, "Hey, I think you're you're not going to survive this and be out of business in two months." Um, and the reason I heard of this after the fact is cuz, you know, 8 months later, we were still around. We we we made some adjustments and we had we had yet to raise any additional capital and a bunch of folks are like, "Wait a minute, you're still in business. Like, how are you how are you guys still alive? Uh, yes, the team was a lot smaller, but what had happened was we went from a $0 styling fee to a $40 styling fee because that was really the only way to help have our customers sort of um provide some working capital. We turned through probably about 40% of our customers at that time. But that but the 60% of remaining customers, they ended up being like the best customers, much more loyal, willing to pay the $40 and uh sort of like the idea of the service we were providing enough to help essentially finance our business or or uh you know through the $40 styling fee. So, it's such a fascinating story because like it's so counterintuitive to what a lot of people think of like, oh, I'm going to lose all these customers, but like what you fundamentally knew about your business is like you needed to recover cash from these sales. Like, you know, you pay for these customers and your gross margin needs to be at a certain level and you sacrifice 40% of your, you know, growth or customer book for the sake of survival and profitability to continue to fund uh, you know, the business. And I feel so many founders struggle with a hard decision like that to be able to, you know, look at like what are the fundable economics of this business to be self sustainable. So many people get kind of propped up with venture money that they don't really actually try to solve this problem. And um I think it's pretty unique that you you guys did that relatively early and saved the company because of it and obviously a great outcome because of it. Yeah, I mean it was a it was a super painful forcing function, but there was also a really key strategy that was born of that really difficult time and that was was we went from a $0 signing fee to 40 and 40 was uh twice as more expensive as anyone else in the space. So where we ended up was like well we're charging double now and the these customers are better. they're willing to spend more. So, I think we need to lean into this and focus on be on delivering a premium experience. Right? There's already someone offering the $20 experience. What does the $40 experience look like? What can we do to live up to those expectations to have better product? Uh, will they pay more for higher price point products because they've demonstrated a willingness to invest $40 in a styling fee? Can we send more products? So, the nearest competitor was only sending five items in a box. I'm like, well, that $40 provides more working capital and better working capital dynamics. So, can we send up to 10 items per box, right? So, we make sure it's worth their while. Um, so that was the beginning. Like, if you ask like when I first started a business, did I have this big vision of being like a premium quality brand and experience? The the answer was no. I I didn't know that at that time, but I kind of stumbled on it with and I think that's really important as a founder is like, you know, every like things happen, but it's like how do you respond to it? What do you learn from it? What is the market telling you? And to me, the market and customers were telling me, hey, there is this segment of customers that are willing to pay more, but if we're going to take that position and claim that, we're going to have to deliver more. So we kind of put our flag, you know, our north star down there. And and then for the next 5 years, we spent every investment that we were doing in operating everything around execution was like how do we elevate our service, our product? How do we live up to those expectations of of what we're uh claiming so that we can meet customer expectations and make them happy? And so that was sort of the beginning of the sort of insight of like well if we do this and we have a better customer paying more shouldn't we have a higher LTV right we don't have we didn't have that higher LTV when that moment happened but but true to sort of in data we trust over the next couple of years we kept seeing the LTV in chub um in the beginning not through attention but first through the increased price points and and the increased uptake, people buying more items per box. And so that was like the first big unlock on like, okay, we're on to something and it's working. >> I want to kind of, you know, jump towards kind of the the state of like the next transaction if you want to kind of lead into what happened there. >> Yeah. So we kept doing that and then in in 18 we tried to uh raise a growth round. Uh but what I found was that was very challenging and basically everyone said no because there was already a large competitor in the space that was mass market and going public and so um from a institutional investment standpoint like we were still maybe 150th the size of the number one going public. So they're the clear dominant market leader and uh and so even though our business was growing and profitable there there was just no growth equity that was interested in investing. So, as a result, we just had to continue to focus and grind it out and we were uh profitable but growing moderately. And and I say moderately because we had never raised any more money after I think 2017 or 18 from Forever 21. And so, we still had a very uh very lean balance sheet. And the tough part with this business as you're growing is uh even though you're profitable, your inventory buys are getting bigger, right? And and the inventory needs uh increase. And usually uh the the lead times to invest in inventory grow as well, right? Like you might have six to eight month cycles on placing orders from China because your orders are now bigger. And so we just kept kept growing and and just grinding it out. And I would say in the year 20 22 uh I I had a relationship a pre-existing relationship with Morgan, the founder and CEO of Ador Me. We we had actually known each other friendly for like the past 10 years. Uh and and that's primarily because we shared uh a lead investor. And so we always stayed friendly and when I go visit New York, we would hang out and uh in in 22 he told me their their investors wanted liquidity and the IPO window was open. And so he told me that they had plans to go public. Uh they had a great uh bank that was underwriting the deal, JP Morgan Chase. And we continued to talk and you know we we came to this idea that uh merging the two companies like the timing of merging the two companies prior to the uh IPO would be uh a great strategy from you know from many factors. So we considered you know diversifying the business as a platform. Adori also had a subscription business. Ours was a bit stronger than theirs. And so the idea is we can help uh strengthen their uh subscription business. And then from a product standpoint we are highly complimentary right like we didn't sell any uh any product in the intimates and laundry space uh and vice versa. And so we could offer their product, they can offer ours. And then the obvious other synergies are all related to the boring stuff which would be infrastructure, back office, logistics, sourcing, uh, and and so we just felt like we can build a bigger platform and really dominate this business model and be like best-in-class at the business model of running subscription, being digitally native, DTOC, while being able to source your own products. Real quick, if you're a founder doing over 5 million in revenue and want to know what the best hund00 million plus founders are doing to fuel their growth, then make sure to subscribe to our $100 million exits newsletter. Get the playbooks that are proven on how to fund, grow, and sell your business. I'll even give you a curated list of investors that want to invest in your business. It's totally free. All you have to do is click that link down below. Subscribe. Do it now. I promise it's worth it. You won't regret it. You got nothing to lose. Go ahead, subscribe. Now, back to the show. And >> I think one thing I want to call out here is just like ali it's a great outcome, especially, you know, because they had, you know, um, like you said, Morgan Stanley, like getting everything ready and like getting this big package deal and you were the perfect tuck in, you had to kind of juice the deal to to get it over the finish line and bring everything together. You had such a deep existing relationship. And I want to bring this up because I talked to so many founders that are just like, "All right, we want to sell." I was like, "Well, who who do you know that like who who's talking to you about buying you?" And they're like, "Well, that's that's your job." And it's like, "Well, yeah, but you know, it's not going to happen in three months." You know, it's like you're not going to sell for $100 million, 50 million or whatever it is, you know, unless people know, you know, intimately who you are, what makes you special, um, and actually care about doing a deal and have intimate knowledge of the deal. So I tell a lot of founders it's like if you haven't already had those relationships of someone that could buy you should start as early as possible. You know it's like when Walmart bought us like we were already in bed with them for about a year year and a half before you know the that actually came to a realization. Um, and so I just I think that's something that a lot of founders don't realize in these like big strategic acquisitions like oh they sold for this much money and like well that's was in the works for a long time. You know people like doing people with deal you know people like doing deals with people they know >> and >> know and they like >> sometimes I've seen some deals where they just kind of like you know have to do a deal. But uh in most cases, yeah, it's like I've had many people on the podcast where it's just like, you know, they could be on the acquiring side or the the sell side and it's just so much of the common denominator is like, you know, they they knew they knew each other for a while at a conference like an industry conference or they were friends before or met through, you know, initial contact. Yeah, I I mean I can agree with you more and I I I would say also in hindsight as a when I was a younger founder, a younger entrepreneur, you get so wrapped up in running your business, right? Cuz there's so much to do and there are times where you feel like you're drowning or and so then like just spending time shooting the and relationship building sometimes feels like like a waste of time or not the best use of your time. But if it's with the right folks that are related to your business or strategic, um, it's actually super important, like you said, to build relationships early, especially if you have any intent on wanting to sell or they're a potential buyer. Um, it's it's really really critical. How does one shoot the with, you know, it's like it's like I'm curious like how like how do you tell someone to be targeted on shooting the with the right people that can actually move the needle? >> Uh I think one the right folks in the room, they have to be decision makers, right? Like you have to be a decision maker. So, when I spent time, even with Morgan, it was really a lot mostly one-on-one time and it was more in a casual setting. Uh, you know, grabbing lunch, getting coffee. Um, I'm visiting New York, we're going to hang out for, you know, I'll stop by the office, we'll hang out. But I wasn't spending time like for example with the rest of their C team. I wasn't presenting anything. Um and and I would say a lot of it is subtle in like just sharing like every entrepreneur, every founder you have goals like what are you trying to achieve? What are you trying to do for next year or this year? And then I think he saw a handful of times just under pro underpromising and overd delivering. And I think that was really key because that establishes your credibility. Like you're not trying to sell the company, but you're like, "Yeah, I want to try to do this this year. I want to grow 50 40%." And then I came back and I was like, "Hey, guess what? We grew 60%." Like, we're we're crushing it. And so that really helps establish credibility when I think you can be authentic and you can share what you're doing. And then you also like share a little bit about your personal life in in terms of like what's going on with your family. We all we happen to be in similar life stages having had young kids. So there's just lots of things to just be friendly about and talk about and and just kind of stay in touch. And I think that's kind of how you shoot the is just just spend time and just try to get to know the person and what makes them tick and share about yourself. So simple, you know, when you think about it. But I see so many people struggle with it because, you know, it's like again this it so happened Morgan was also building a great business that, you know, there's a lot of complimentary, you know, attributes like were you shooting with people that didn't amount to anything? You know, obviously didn't transact. Uh, you know, it's like how do you make the how do you kind of surround yourself with the people that actually can, you know, potentially impact the output of your business? be curious to get your if you have any thoughts. >> No, I do. So, no, I don't like I I try to be helpful to everyone because I believe in karma and you just never know. So, if people want to spend time or or coffee, even if they're just starting out, like I'm happy to spend some time and try to be helpful or provide some advice. Now with someone like Morgan, it was a bit different because we had like our businesses were very similar in the way that we were growing it except we didn't have any we didn't feel any competitive threat cuz we were in like completely different categories. And so our approach and our innovation and our business model there's like a lot of overlap where we actually felt like even if we never did anything just by talking to each other we can share some best practices and we can learn from each other. So that's why, you know, I think you'll feel certain types of gravitational pull from different folks where it's not just about like you get along with them, but you feel like there's enough relevance in your business or what you're working on where you feel like, oh, it'll be really easy and organic for that person to be helpful and or vice versa. I want to kind of you know advance towards all right this this deal you merge with adore me with the expectation that you're going public and that's kind of the narrative victorious seeker comes in and changes that outcome and you know ends up putting in a bit like how how do those conversations happen and you ultimately why was it better to sell for the cash versus doing an IPO. So part of it is hindsight is 2020 but I would say uh let me let me recap the timing because it was a whirlwind. So the consummation of and completion of our merger transaction with Ador me happened and closed in April of 2022. uh they filed uh and and we started talking like in December of 21 and uh Adori had filed their confidential S1 filing to go public in February and the timing of that was supposed to be May. So we were all super excited about uh this impending IPO in May. They planned like parties and the big announcement and all of that, but then the markets um turned over started turning over in April, May of 22. >> Yeah. >> Yep. >> I think a lot of people remember and and so then the IPO window shut >> and in a way we weren't all that disappointed because I would say because we had both respectively been in the business and been running it so long. It's like when you've been building a business for 12 years, 11, 12 years, you're kind of like, okay, well, we're profitable. We're not we weren't trying to go public because we needed we need to raise money. More of it was shareholder liquidity. And so, we'll just keep need to keep our heads down and keep doing it a little longer until the markets get better. Victoria's Secret came about not initially they they weren't they they came about in Septemberish and I heard through Morgan because they were having some discussions about uh wanting to invest $150 million of which most of it would go to secondary. So they wanted to take a large ownership stake. And so I was like, okay, if that happens, that sounds great because and if you think about the timing of it, that that was to provide some shareholder liquidity because the IPO windows got shut and wasn't going to happen. And so I want to give credit to Morgan for having the relationship with the CEO. And like you said, these things don't happen overnight. I think there were two factors. one, Morgan had a pre-existing relationship with the Victoria Secret CEO at the time. And then number two, we were adoring was on the precipice of going public and had filed and it was a very real thing and was validated by real bankers and there was real demand and and so I think that really helped validate some sort of uh market value of what a potential IPO would have been and that kind of set some sort of benchmark for uh Victoria Secret to look and and and prescribe a value uh to the investment. And so what happened was Victoria's Secret spent about 2 months doing due diligence for this investment. And then after finishing their two-month uh due diligence for this investment, I think they had a a realization that making this investment was was not going to be that helpful or uh or strategic in helping uh digital innovation or helping to really move the needle and impact Victoria. Victoria Secrets own digital innovation, right? Because they saw how differently we did things, the the technology stack that we had built and how we run the company. It's just it's fundamentally probably very different than than how Victoria Secret ran their business. And so they're like, well, this is a completely different thing. Just because we get to peek behind the curtain and see how it all works, how the sausage is made, doesn't mean we can make the sausage in house. We just don't have that capability. We don't have the DNA. We don't have the technology. We don't have the engineers. So, so they came to this understanding that like well making this investment is not really going to do anything. What are we going to do? Twiddle our thumbs and watch this for the next three years. We're not in the business of making investments. I think if we really want to make a move and and have a a meaningful chance to transform our digital innovation, we're we're going to need to own this outright and then like really have it be able to make an impact for our core business internally. And so, uh, I I I want to say then in November of 22, I got an update from Morgan saying like, Victoria Secret wants to buy the whole business. We're bringing this to the board, got approved in like days, and they said, and we want to close in the next 30 days, which was insane, you know, relative to the transaction value. And and I actually was skeptical that it was that they would be able to pull it off. I'm like, this is too big of a transaction to to transact between the beginning of November and the end of December with the holidays. I'm like, how is this going to get done? It's probably going to get pushed out. >> No holidays. >> Yeah. Work through the holidays, but I still I I still don't see how it gets done. and and and and to their credit, uh they worked non-stop around the clock and it was mostly the deal was consummated mostly out of New York. So I wasn't uh very close to the actual transaction, you know, deal. Um, and I really just kind of waited for all the different um, like sign offs and signature papers that I had to do uh, in in respect to my shareholders or our shareholders on the on our side of the transaction and as far as for the look. Uh, and and I actually remember because I was on vacation, winter vacation in Beaver Creek the whole last week of winter break from December to Jan 1st and we I literally signed all the papers on December 31st. >> Yeah. Didn't you get a call on the mountain? Yes. You're like skiing or something like that. >> I was skiing and trying to ski and it was snowing and uh and there were many calls. um with various attorneys at the time. I don't remember them all, but there's just like a whole bunch of there are so many things that you have to sign off on uh related to a large transaction by a public company, right? Like they they really have to be thorough. >> Well, it's an impressive story and you ultimately still grew rapidly after that transaction. Obviously, there was an incentive. there are some, you know, pretty sizable earnout left to to to get, you know, with growing the company. Um, what was it like kind of growing the company within Victoria Secret? So the great part about the transaction post transaction is because they're a big company like they they tend to move pretty slowly and so I think postacquisition there wasn't like a whole plan in place especially because this is not a particularly inquisitive company that uh like some of the SAS companies that have sort of a built-in team and muscle to acquire and integrate And so for the first year, they're basically like, we're not going to do anything much other than sort of the required financial compliance integration that we need. So I like to say that it took, this is kind of funny and I I think I could say it. I like to say it took the first six months we had to figure out how to move our bank account and get a new bank account where where the master treasury was owned and controls were owned by Victoria Secret. Uh and then the next Yeah. And then the next six months, we had to learn how to get off of our accounting systems and QuickBooks and and get into uh into Netswuite, >> which which actually took a whole which actually took a whole year, not six months. >> So, it was a lot of like that very basic boring stuff back office. Uh but they didn't mess with the the business at all. And that was that was great because we got to continue focusing on our business plan and our strategy. And once again, I I would say like because we had built such a strong LTV. Uh I felt like the business was fundamentally sound. I felt very comfortable now. uh where we had the balance sheet support to be much more aggressive about growth both from a paid acquisition side but also from the inventory side. And so we weren't, you know, we we were still very disciplined about spending and staying within our our internal guard rails, but at that point we just felt a lot more comfortable like if something got screwed up or something unexpected happened, uh, we would have the, you know, full financial support of Victoria's Secret to work things out. Unfortunately, I I I want to say though that the the scaling of the business from let's say from the $50 million revenue point to 140, that was actually the easiest time of my career and and and running a business. And I think that's a testament to having had enough time to build the right people, the right teams and even though the team was still fairly lean, everyone knew what we're what to do and we had a very strong financial FPNA model so that if we wanted to scale more like we just drop it in the model and the outputs would get shared with everyone respectively. So they're like a financial model for operations and one for the styling team and one for headcount, one for customer service, one for merch. And that model we had like sort of hardened and it had been through so much testing over the years that it was highly accurate. Uh and so we can share that model and it was just like very easy to scale it because we had a great people, we had great team and we had very accurate financial modeling. Well, that is comforting to hear. Uh, you know, postacquisition can often be a mixed bag for so many people and it's great that, you know, you're able to achieve such great accomplishments post acquisition. You I know for my situation selling Walmart after we were, you know, bought, it was not uh it was it was in all fairness, it was a we were blitzing like crazy and breaking all the rules in Walmart to do so because they were like, you know, we were trying to force our launch to go quicker. so that we could basically force Walmart in commitment uh you know for you know once they get you know once Walmart's publicly committed to something they committed they you know fortunately unfortunately pulled a plug week before our launch so you know a little bit of a different uh scenario but we definitely I think we doubled the team in six months went from like 30 to 60 people um pretty rapidly but um Brian I've been really enjoying this conversation you've had a a very long journey getting from, you know, 2011 and being a daily newsletter uh to basically a $700 million outcome in the grand scheme of things. What's kind of your advice to the founders that are in this space, this direct to consumer space? You kind of caught the the the perfect last moment to kind of maximize enterprise value before valuations really fell off a cliff in this space. What's your advice to to founders that might be currently in a brand building, direct to consumer uh space right now, fashion? >> My advice around this space is that it it takes a long time to build a brand and it's very hard to build a brand. And so I in order to even have a chance, you really have to uh I think you really have to have perspective that it's going to be a decade plus long journey. And so, you know, knowing up knowing what you're signing up for and be like, you know what, this mission or this brand uh is is really calling me and uh and there's not a lot of M&A activity in this space. So I would say, you know, slow and steady wins the race uh in this space. Like there's some points where you come out with a product or brand and maybe it's hot for a minute, but really to build uh a great business and a great brand, I think you need sort of that long-term sustainable approach and outlook. So that's that's what I would say. And I would say don't listen to um don't worry too much about like you're going to hear a lot of noise. It's a very noisy crowded space. It's very competitive and that's why um that's why it's hard to sustain. You can be as big as remember I had an investor Forever 21 2018 and they were on top of the world and about a year ago they went through the a bankruptcy. They're they were no longer uh they're no longer around, right? And so, you know, this business can be fairly volatile. So, it's not for the faint of heart. >> Those are some wise and unfortunate words. Um, and and what are you doing now? You know, it's been a year. Took a little took a little time off. Post exit paradox experience. What are you uh what are you working on now? >> Yeah, so it's been uh almost exactly a year since I left the company. The first six months I spent some time uh sort of unwinding and decompressing from having been a founder. Uh and that could be a whole another episode about like all the feels you go through postexit when something was your baby and now you've sold it and and then in some ways you don't know what to do with yourself and you feel a bit lost. uh and yet no one want is gonna cry for you, right? And so that's a whole another thing. But um but at heart I I really am a serial entrepreneur. I love to build. I love to be in the arena. And and now I'm working on a AI connected smart beauty mirror that is able to scan your face and and your skin as you just use the everyday beauty mirror and provide a full skin analysis where your skin health scores appear on your phone. and your phone then becomes your digital aesthetician. So, think of it as like the aura but for your face. So, that's what I'm >> Yeah, I did see the the demo of it. It's it's pretty gnarly how much sun damage I have. Well, sun damage is fundamentally 80% the the cause of all unwanted skin concerns like aging, hyperpigmentation, uh, and a lot of other um, skin concerns. So, I think helping even on on that one score, if I can help everyone in the world improve their UV sun damage score by being just more aware because you can't see your UV sun damage uh when it starts because it's under the skin. It's it's uh deeper in the dermis. um then I think you know I think we can make a pretty big impact to how people think about skininc care and uh and and even you know beauty you know even after a successful exit and previous exits to the you know this company even way back in the early 2000s you just can't help yourself but to get back in it. Yeah, I well I think entrepreneurs have a you know I I like to think of entrepreneurs like professional athletes or professional idea builders and executors and and I do believe that entrepreneurs like have some sort of shelf life where if you're not in the game then you know all the skills and muscles that you use to build company are going to atrophy and uh You know, I think I have one more left in me. I I don't get me wrong, they they take incredible amounts of work and energy and and I actually seen a lot of founders have a bad experience and then never do it again. Meaning they are one or two time founders and they have a bad experience of maybe a bad outcome or having to wind down a company and it is very hard and painful and then I see them never doing it again. And um and so I think those that are willing to grit it out and keep going and are glutton for punishment but also can enjoy it and you know I I'm not sure we just come back to to to build mode and founder mode. Can't help ourselves. >> No, I know it's I'm guilty of it myself. Brian, if someone wants to either learn more about your journey and or reach out, um, what would be the best way for them to to learn more, get in touch? >> The best way to reach out to me would actually just be to email me to my personal email address for now. Uh, it is just my name, first name, last namegmail.com. Brian regmail.com. >> Boil that out so the bots don't get it. But, uh, if, uh, if anyone wants an intro to to Brian, by all means, leave a comment or reach out to me and I'll be happy to introduce you to to Brian. Just make sure it's worth his while. Yeah, >> no problem. I'm happy to help and and pay it forward. >> No, I appreciate that. Um, Brian, it's been absolutely amazing hearing this story. uh there's not a lot there's some triumphs in in this space and I think you're one of them and it's been amazing to kind of hear the the backstory of what what made you know the the business so successful and really appreciate you coming on and sharing your story. >> Yeah, Kirby, thanks for having me. I really enjoyed it and uh whenever you're in LA I'd love to play some uh pedal again. Had a lot of fun. >> We're going to make that happen. I uh I might I'll be in San Diego in two months, but yeah, a little bit of a track, but I'll be like a slam, so we'll see. But we'll take that offline. Uh Brian, thanks for so much for coming on. >> Okay, awesome. Awesome time. I enjoyed it. >> If you were inspired by today's episode, then go ahead, watch this next episode. Promise it's worth it. And if you really enjoyed this last episode and you want to connect with the guest I had on today, make sure to leave a comment down below telling me why you would like an intro to this guest and I'll make it